CNOOC-Nexen deal on way

Posted on » Saturday, December 29, 2012

BEIJING: China's CNOOC Limited yesterday said it expects its $15.1 billion takeover of Canadian oil and gas producer Nexen to close in the first quarter of 2013 at the earliest, a move that could be aimed at giving US regulators more time to approve a sensitive aspect of the deal.

The company is still awaiting US approval over its purchase of Nexen assets in the Gulf of Mexico after Canadian officials approved the deal earlier this month.

A ruling by the Committee on Foreign Investment in the US, or CFIUS, is seen the main remaining regulatory hurdle for CNOOC and Nexen, which resubmitted applications to the committee in November.

"The closing date of the deal is closely linked with the approval result. Now it looks like it is not practical to close by end of the year. So now we expect it to be closed at the earliest in the first quarter of next year," said a CNOOC official.

US companies face barriers to invest in around 100 Chinese sectors, restricting their opportunities in the world's second-largest economy. Chinese firms wanting to invest in the US fear a political backlash in Congress and being blocked on national security grounds by CFIUS.

One issue the committee will examine is whether Nexen's assets are too close to sensitive US military areas.

Though just a fraction of Nexen's reserve base and production, an acquisition of the Canadian firm's Gulf of Mexico assets would give CNOOC a foothold in the world's prized deep-water oil province.

Industry officials are optimistic about winning US approval, arguing that the Gulf of Mexico assets are relatively small, but carry huge exploration risks and require massive spending.

"I don't foresee many political hurdles from the US ... CNOOC, which already holds US onshore assets with Chesapeake, will just be one of hundreds of firms already working in the area," said one Beijing-based official with direct knowledge of CNOOC's overseas investment.